Credit reports hold longer memory than issuers

Issuers don't keep score of bad debts as much as credit reports do

Opening Credits columnist Eric Sandberg
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for

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Dear Opening Credits,
I opened a credit card a couple years ago and never made a payment. It went into collections, but I paid it off. Can I apply for credit at the same store again?   -- Leslie


Dear Leslie,
You are free to apply for credit cards wherever you want. But being accepted by the same creditor again, after blowing it with them before? Well, that's another story. In your case, you may or may not be given another chance. Still, your application being accepted is not as dependent on your past relationship with that particular creditor as you may think.

Companies that issue credit cards do not hold emotionally driven grudges. It is always possible your old credit card issuer kept internal records that it may refer to if you apply for new credit, so yes, you do run that risk. However, with every application, the issuer will check your current credit rating and income status, then decide if you're a viable candidate for the product.

So the real question should be, "Are my credit scores and household earnings -- the way they stand now -- appealing enough to qualify for a specific credit card?"

To know, pull your reports from the three credit reporting agencies -- TransUnion, Equifax, and Experian -- for free at As you'll see, evidence of the account that you mismanaged should still appear on your credit file. That's because negative information such as late payments and collection activity remains on your credit reports for seven years.

The company has the right to make a judgment about you based on your past performance with it or any other lender. If you do not have any recent and positive information on your report that shows that you are, in fact, a responsible borrower, I would not be surprised if your application is rejected.

However, the credit card company may just check your credit scores and not your actual report. These scores act as a sort of shorthand for how you've managed credit and debt, and companies use them to make swift and accurate decisions.

Credit scores, such as FICO, take the financial information from credit reports, weigh up different factors, then translate it all into a number between 300 and 850. Collection accounts, even if they were satisfied, are still counted as a negative -- for now. A new version of FICO will not factor in paid collection accounts but it will take a while before the updated FICO is widely used. That means the debt that went into collections is probably being held against you, even at a zero balance.

Since  you want a new credit card, obtain your scores to know what type of credit product you're eligible for today. You can pull them for $20 from each credit bureau at These rough numbers can be your guide:

  • Mid-600s and below is poor
  • Mid-600s to high-600s is fair
  • High-600s to mid-700s is good
  • Mid-700s and above is excellent

Then, check out the cards that issuers have developed for people based on those scores. Mind that your income matters, too. Higher incomes typically will qualify you for larger credit lines.

On a final cautionary note, if you do end up getting another credit card, you don't want to screw this one up. Don't charge more than you can afford to pay off every month, pay on time and never miss a payment. Allowing multiple accounts to end up in collections will ruin your chances of being able to qualify for a mortgage, car loan or even a job. The lenders are trusting that you'll repay them in full and on time. Don't abuse that trust.

See related: 10 things not to do when you apply for a credit card

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Updated: 03-23-2019